Weak US employment report increases red flag on economy
US job growth weakened sharply in May, and wages rose less than expected, raising fears that a loss of momentum in economic activity could spread to the labor market, putting pressure on the Federal Reserve to cut interest rates. year.
The broad cooling in employment reported by the Ministry of Labor on Friday was before a recent escalation of trade tensions between the United States and two of its major trading partners, China and Mexico. Analysts have warned that trade disputes can undermine the economy, which will celebrate 1[ads1]0 years of expansion next month, the longest on record.
Adding a stick to a closely-held employment report, far fewer jobs were created in March and April than previously reported, indicating that employment had shifted to a lower gear. The labor market so far has been largely resistant to the trade war with China.
"Today's report gives a cut more likely, and supports our view that trade tensions will eventually slow enough for the Fed to react in September and December with cuts," said Joseph Song, economist at Bank of America Merrill Lynch in New York.
Wages for community wages increased by 75,000 jobs last month, the government said. It was the second time this year that the employment gains fell below 100,000. The economists polled by Reuters had forecast the wage increases by 185,000 jobs last month. Job growth in March and April was revised down by 75,000.
In early May, President Donald Trump beat surcharges of up to 25% of $ 200 billion of Chinese goods, which led Beijing to stand. Last week, Trump said he would impose a tariff on all goods from Mexico to force that country's government to stop immigrants from Central America from crossing the US border.
Speaking to prevent the tasks going in 5% on June 10 continues. Fed Mayor Jerome Powell said on Tuesday that the US central bank closely monitored the consequences of the tensions on the economy and would "act as appropriate to sustain the expansion."
Trump, who has routinely tweeted about the strong labor market, made no comment on Mays weak employment but defended duties on Chinese goods. White House Financial Advisor Kevin Hassett told Fox Business Network that bad weather in the Midwest was blamed and described the weak job gains as "a bit of a blip".
However, economists said there was nothing to suggest the weather was the culprit.
"The weakness of job growth was largely experienced across industry groups and not obviously driven by distortions such as weather or strike," said Michael Feroli, economist at JPMorgan in New York.
US Representative Representative Speaker Nancy Pelosi, a Democrat, said that the employment report was "a disruptive sign that the administration's catastrophic special interest agenda is eradicating our economy."
After the report, financial markets were priced in a price search as early as July and two more later this year. However, economists believe the Fed is likely to wait for more signs of weakness in the labor market and clarity of trade issues before monetary easing. Fed officials will meet June 18-19.
"Fed officials are likely to remain cautious at the June meeting and keep all their opportunities open," said Michael Hanson, head of global macro strategy at TD Securities in New York. .
The dollar fell to a 2-1 / 2-month low against a basket of currencies, while US government bonds rose.
The work cards
The decline in wage growth last month is likely to undermine the labor market's health, since layoffs remain low.
Employment gains in the last three months have on average 151,000, over the approximately 100,000 needed per month to keep up with the growth of the working age population. In the four months since the first hiccup in employment appeared in February, the monthly wage settlement averages only 127,000, the slow pace of a comparable stretch of nearly seven years.
Some of the weaknesses in employment could be due to the worker's shortage, particularly in the field of construction, transport and industrial sectors. But the shortage of labor is somewhat undermined by moderate wage growth.
Average hourly rate rose only 3.1% from the same period the year before, the slowest annual increase since September. Only three months earlier, the wages had risen the highest in a decade, but the gain has been moderate since.
The light recruitment report that added soft data on spending, business investment, production, and home sales to suggesting the economy was losing momentum in the second quarter following a temporary increase from exports, inventory accumulation and defense spending. Growth is cooling, since the massive stimulus from last year's tax cuts and expenditure increases is shrinking.
Atlanta Fed expects gross domestic product at 1.4% annual rate in the second quarter. The economy increased by 3.1% in the first quarter.
Unemployment remained close to a 50-year low of 3.6% in May. A wider degree of unemployment, which includes people who want to work but have given up and those who work part-time because they cannot find full-time employees, fell to 7.1% last month, the lowest since December 2000.
Hiring decreased across all sectors in May, with the proportion of industries showing job gains during the month at least since July 2016.
Production salaries increased by 3,000 last month, having received 5,000 jobs in April. The sector is struggling with an inventory overhang that has resulted in companies placing fewer orders at the factories.
Employers in the construction industry estimated 4000 workers in May after adding 30,000 jobs in wages in April. Employment and business activity increased by 33,000. Transport and warehouse salaries fell as retailers. The government throws 15 000 jobs, most of them for 16 months.
(Reporting by Lucia Mutikani, Editing by Andrea Ricci)
